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Warren Buffett Predicting Upcoming Stock Market Crash

May 16, 2015

Billionaires Dumping Stocks; Stock Market Crash on the Way

When it comes to investing in the stock market, we’re told to follow the smart money. Who might that be? The most influential investors/businessmen in America today are Warren Buffett, John Paulson, and George Soros. Their investing acumen has helped them amass billions of dollars and millions of followers.

With the stock market trading at record highs one would think they’re still snapping up U.S. stocks. The NASDAQ is up 275% since the markets bottomed in March 2009, and the New York Stock Exchange is up 165%.

The most important stock market indices are keeping pace. The S&P 500 has climbed more than 210% (and closed above 2,000 for the first time ever in August 2014). The Dow Jones Industrial Average has increased 175%.

But should we follow the smart money when they’re shedding American stocks? Some of the most visible and vocal billionaire investors are turning their backs on U.S. stocks. Are they preparing for a stock market crash in 2015? And should we follow suit?

Over the last couple of years, Warren Buffett’s holding company, Berkshire Hathaway, has been dumping its exposure to American stocks that rely on consumer spending.

Also Read: Stock Market Crash in 2015 is Coming, Despite Widespread Bullishness

For example, at the end of the second quarter of 2012, Berkshire Hathaway held 10.33 million shares of Johnson & Johnson.(1) At the end of the second quarter of 2014, it held only 327,100 shares.(2) Over a two-year period, Buffett’s holding company sold off 96.8% of its holdings in Johnson & Johnson.

Berkshire Hathaway also culled its holdings in Kraft Foods Group, Inc. (NASDAQ/KRFT). In the second quarter of 2012, Warren Buffett’s holding company held 58,826,390 shares; two years later, it held just 192,666 shares. That represents a 99.7% sell-off.

In position number six, The Procter & Gamble Company (NYSE/PG) is still one of Warren Buffett’s top holdings. That said, Berkshire Hathaway currently owns 52,793,078 shares of Procter & Gamble, or two percent of the company. But two years ago, it held 59.6 million shares. In just two years, Warren Buffett has dumped 11.5% of his holdings in Procter & Gamble.

What stocks does Warren Buffett think will do well in a correction? Since the second quarter of 2012, Berkshire Hathaway has increased its holding in Wells Fargo & Company (NYSE/WFC) by 225%, American Express Company (NYSE/AXP) by 193%, U.S. Bancorp (NYSE/USB) by 21%, and The Bank of New York Mellon Corporation (NYSE/BK) by 31%.

It appears as though other well-known billionaire investors are predicting a major correction and shedding their once-heavyweight U.S. stocks, too. Billionaire investor John Paulson’s hedge fund, Paulson & Co., is unloading certain U.S. stocks, including JPMorgan Chase & Co. (NYSE/JPM), Family Dollar Stores, Inc. (NYSE/FDO), and The Sara Lee Corporation.

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John Whitefoot is an editor at Lombardi Financial, specializing in low-priced investment opportunities. He contributes to Lombardi’s Profit Confidential and Daily Gains Letter newsletters. John has been a financial writer since the late 1990s and has written on everything from penny stocks to blue chip stocks to the broader issues that affect the stock market. John has profiled more than 1,000 low-priced stocks, researching and covering numerous sectors including health care, media, manufacturing, IT, education, hospitality, natural resources and retail.

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